Mortgage interest rates lower than EU average, says Central Bank

IRISH CONSUMERS continue to get substantially cheaper mortgages and higher interest on their deposits than the euro zone average, figures from the Central Bank have revealed.

The average interest rate for Irish mortgages stood at 2.98 per cent in February, compared with a euro zone average of 3.86 per cent according to the figures.

Irish homeowners are so much better off than their counterparts throughout the euro zone because of the widespread availability of tracker mortgages in the Republic during the boom years, which track European Central Bank (ECB) rates. The cost of repayments on these mortgages has fallen following two successive ECB rate cuts towards the latter part of last year. The ECB’s base rate stands at 1 per cent.

The Central Bank also said interest rates on household term deposits increased significantly over the past 12 months and attributed the increases to attempts by the State’s to bolster their cash reserves by offering more attractive rates to consumers with money on long-term deposit.

The average interest rate on all term deposits has climbed from 2.78 per cent at the end of 2010 to 3.46 per cent by the end of February. Across the euro zone the average interest rate paid on deposit accounts was 2.79 per cent.

The figures also show interest rates on outstanding loans to households continued its downward trend last month with the average on all outstanding loans falling to 6.09 per cent compared with 6.12 per cent at the end of January.

The interest rate on short-term loans of up to one year, including overdrafts and credit-card debt, was 8.86 per cent at the end of February. The equivalent rate reported by all credit institutions in the euro area was lower, at 8.1 per cent.

Meanwhile, the average rate on longer-term loans with an original maturity over five years was 4.24 per cent at the end of February compared to a rate of 5.28 per cent reported by all euro area credit institutions.

When it comes to new business, interest rates on new loans to households for house purchases fell marginally in February 2012 and the average interest rate with either a floating rate or up to one year initial rate fixation was 3.09 per cent, compared to 3.11 per cent in January. The equivalent euro area interest rate on variable rate and up to one year fixed rate mortgages in February 2012 was 3.44 per cent.